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Savers struggle worsens
Inflation figures released today show the Consumer Prices Index (CPI) increased during April from 4.00% to 4.50%.
To beat inflation, a basic rate taxpayer at 20% needs to find a savings account paying 5.63% per annum, while a higher rate taxpayer at 40% needs to find an account paying at least 7.50%.
Taxpayers can choose from 2 standard accounts that negate the effects of tax and inflation, all of which are five- year fixed rate ISAs. Worrying for everyone, there are no accounts available for any taxpayer that beat Retail Prices Index (RPI) at 5.20%.
If savers main concern is inflation there are a handful of inflation linked accounts on the market.
The effect of inflation on savings means that £10,000 invested five years ago, allowing for average interest, inflation and tax at 20%, would have the spending power of just £9,481 today.
Sylvia Waycot, spokesperson for Moneyfacts.co.uk, said:
“After one month’s reprieve inflation is back on the rise, scuppering hopes of getting any meaningful return on family savings for another month.
“CPI is more than double the Government’s 2% target. Every time it rises, spending power decreases and any hard earned nest egg or savings safety net is further eroded.
“The only certainty for anyone trying to supplement their income with savings interest is that it will result in disappointment.
“Over the last six months the number of savings accounts that beat inflation for basic rate taxpayers has dropped from 91 to 2 today, all of which are fixed rate ISAs.“Cash ISAs limit the amount of investment and therefore the return, which is yet a further hindrance when trying to make ends meet.”
Moneyfacts is the UK’s leading independent provider of personal financial information and our data is used and trusted throughout the financial industry.
Think carefully before securing other debts against your home, your home may be repossessed if you do not keep up repayments on your mortgage.
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